Qualcomm (NASDAQ: QCOM), which competes with Texas Instruments (NYSE: TXN), reported Q1 numbers after the bell on Wednesday. The data continue to show that all is not well with the world.
Demand for Qualcomm's products is down, and as far as management is concerned, earnings visibility just isn't in the cards due to the financial mess and its effect on the company's marketable securities. Talk about not inspiring confidence.
For the first quarter, Qualcomm delivered pro forma earnings per share of $0.31. That represented an ugly drop of 40% on a year-over-year basis. Revenues inched up 3% to $2.5 billion. The top line beat expectations, but the bottom line didn't come anywhere close as Wall Street was counting on $0.47 per share. Then again, what did any of us expect? It's tough out there in the world.
On the cash-flow side, Qualcomm saw its pro forma free cash flow increase substantially to over $3.4 billion, driven by a $2.5 billion settlement payment from Nokia (NYSE: NOK). Last year at this time, free cash was roughly $900 million. That's a lot of cash to play with, but you have to remember that growth rates are bad, not only year-over-year, but sequentially. And the guidance for next quarter indicates that Qualcomm will see further declines in its top line and its operating income. For the full year, guidance has been cut.
At the time of this writing, Qualcomm shares were trading down by well over 5%. That seems about right to me. I could not see buying on this terrible news. While Qualcomm is a big name in wireless technology, selling stuff based on CDMA and 3G, I'd avoid the stock.
I don't like the guidance, I'm not enamored with the impairments on its investment portfolio, and I think there are safer investment ideas out there. I just don't think I could sleep at night owning Qualcomm since I'd always be worried that its next move would be retracement to the 52-week low.
Disclosure: I don't own any company mentioned; positions can change without notice.
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